Being involved in a serious car accident is stressful enough without having to deal with financial uncertainty. Unfortunately, many drivers learn the hard way that purchasing the minimum required insurance coverage can lead to disaster. No matter how diligent you are behind the wheel, all it takes is one careless motorist to total your vehicle and send you to the hospital.
In this guide, we will discuss the various kinds of auto insurance available in California. While you might be familiar with many of the options, some types of coverage—such as gap insurance—often go overlooked even though they could save you thousands of dollars down the road.
Let’s examine some of the most important types of coverage to consider when insuring your vehicle:
1. Personal Liability Coverage
If you’re caught driving without the minimum required liability insurance coverage, you could face a steep fine and a driver’s license suspension of up to four years. California’s minimum car insurance requirements are as follows:
- $15,000 in bodily injury coverage per person
- $30,000 in bodily injury coverage per accident
- $5,000 in property damage liability coverage
Auto insurance companies are also required to offer you uninsured motorist bodily injury (UMBI) coverage and uninsured motorist property damage (UMPD) coverage, but these can be waived.
Your personal liability coverage will pay for losses incurred by other people in an accident that you cause. They will not pay for any damages that you incur such as medical bills, vehicle repairs, or lost income.
As you’ve probably heard before, purchasing the minimum required auto insurance is incredibly risky. Should you cause an accident that seriously injures another person, it is unlikely that the minimum coverage limits would pay for 100 percent of that person’s damages. You would be personally liable for the difference, which could mean financial ruin and potential bankruptcy.
2. Comprehensive Coverage
Comprehensive coverage pays for vehicle damage caused by natural disasters, theft, riots, fires, vandalism, falling objects, and perhaps other events not caused by the policyholder. This coverage may be required if you lease or finance a vehicle.
3. Collision Coverage
Collision coverage pays for damage to your vehicle caused by a pedestrian, another vehicle, or another property such as a garbage can or gate. Both collision coverage and comprehensive coverage will pay the lesser of:
- The expense to repair your vehicle; or
- The expense to replace the vehicle if it is a “total loss.”
Of course, the insurance company will not pay anything in excess of your policy limits. As such, it’s a good idea to purchase collision and comprehensive coverage with limits that would be sufficient to replace your vehicle if it is a total loss.
4. Uninsured/Underinsured Motorist Coverage
As the name implies, uninsured/underinsured motorist (UM/UIM) coverage will pay out benefits if you are involved in a crash that is caused by an uninsured or underinsured driver. This coverage is essential in California, where about 14 percent of all drivers are uninsured—and that’s not accounting for the motorists who carry the minimum liability limits.
Some people assume they do not need UM/UIM coverage if they have health insurance. Although your health insurance policy might help cover your medical expenses, you could still incur copays and deductibles. Also, your health insurance might not cover certain kinds of care such as chiropractic treatments and acupuncture, and it certainly would not pay to repair or replace your vehicle.
Auto insurance carriers are required to offer UMBI and UMPD coverage to customers when they purchase a liability insurance policy; however, you have the option to waive UM/UIM coverage. It is recommended that drivers purchase UM/UIM coverage with the same limits as their liability insurance policy. I always tell my clients to purchase as much uninsured/underinsured motorist coverage as they can afford. The cost of increasing such coverage is surprisingly minimal. I have a great video on my web site dealing with uninsured/underinsured motorist coverage that covers this issue in more depth.
5. Medical Payments Coverage (Med Pay)
Med Pay is a type of no-fault insurance offered in California. That means your Med Pay claim will not be denied just because you caused the crash.
Med Pay covers healthcare costs and/or funeral expenses incurred by the policyholder and their passengers. The policyholder and their family members may also be able to bring a Med Pay claim if they are hit by a vehicle as a pedestrian, injured while riding in another person’s car, or injured on public transportation. Med Pay does not cover vehicle repair bills.
6. Gap Coverage
This is one of the most frequently overlooked types of auto insurance coverage, but if you intend to lease or finance a vehicle, it could save you thousands should an accident happen.
Let’s assume you purchased a car for $28,000. You have a $1,000 deductible and put $2,000 down, leaving a balance of $26,000. A few months later, your vehicle is totaled in a crash.
The insurance company agrees to pay the “actual cash value” of the vehicle, which amounts to $22,000. But you look at your loan statement and find out you still owe $25,000. That means you’re still on the hook for $3,000 plus the $1,000 deductible.
Gap insurance will protect you financially in this scenario. It pays the difference between the value of your car at the time of a collision and what you owe on your car.
Set up a Free Consultation with a Car Accident Lawyer in Long Beach
Your Injuries Are Personal to Me
If you were hurt or lost a family member in a collision, contact the Law Office of Michael D. Waks. It’s not uncommon for car insurance companies to undervalue certain damages or to leave them out of the settlement offer entirely. Attorney Michael D. Waks will make sure you are treated fairly.
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Our Car Accident Response .PDF can help you record the information you will need to bring an auto insurance claim. Print it off HERE and be sure to stash a copy in your glovebox.
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